The UK Government must bring forward changes to the way the oil and gas industry is taxed by March or there will be “extremely serious repercussions“ for the sector, Energy Minister Fergus Ewing has warned.
Danny Alexander, the Chief Secretary to the Treasury, said earlier this month that UK ministers would consult on several new approaches to taxation.
The reforms would lower the tax burden on the industry, which has been hit by recent falls in crude oil prices.
The plans include an investment allowance covering the whole of the UK Continental Shelf to reduce the effective tax rate for investing companies.
Commenting on the impact of falls in prices, Mr Ewing told MSPs at Holyrood: “The extent of that impact will depend on how long the low prices last.
“There are a range of forecasts, suggesting that prices will rebound from current levels in 2015.
“To minimise the predicted impact it is imperative that the UK Government deliver in full their promised new investment allowance and that they do so no later than the March 2015 Budget.
“The prediction that many make is that the oil price will recover, and therefore the horizon might not be that far away.”
But he added that “until the tax changes promised by George Osborne and Danny Alexander a few weeks ago are delivered, there will not be further and new investment in the industry because they do not have the detail”.
“Any later than (March) and I think there would be extremely serious repercussions,” Mr Ewing said.
The minister was also asked about job security in the sector by Labour MSP Lewis Macdonald.
“The minister will be well aware that 1,000 jobs have gone already in the last few months, and thousands more are on the line,” Mr Macdonald said.
“Will he encourage the sector to protect jobs in order to maintain continuity, keep confidence high and provide security for the workforce both on and offshore.”
Mr Ewing said: “We encourage all companies, small, medium and enormous to take on young people and a great many of them do. I think there is more that can be done, and it is essential during these very challenging times that companies do not cut costs by cutting the number of young people that they employ.”
